[Vision2020] Wal-Mart meeting

[Joan Opyr]

More food for thought . . .

For those of you who don't subscribe to the New York Times, which now 
charges $7.95 per month for online access, I'm forwarding a piece by 
economist Paul Krugman.  I'll take my chances with the NYT copyright 
police (as well as Jeff Harkins, G. Crabtree, and Pat Kraut).

Joan Opyr/Auntie Establishment
www.joanopyr.com


December 12, 2005
Op-Ed Columnist

Big Box Balderdash
By PAUL KRUGMAN


I think I've just seen the worst economic argument of 2005. Given what 
the Bush administration tried to put over on us during its unsuccessful 
sales pitch for Social Security privatization, that's saying a lot.

The argument came in the course of the latest exchange between Wal-Mart 
and its critics. A union-supported group, Wake Up Wal-Mart, has 
released a TV ad accusing Wal-Mart of violating religious values, 
backed by a letter from religious leaders attacking the retail giant 
for paying low wages and offering poor benefits. The letter declares 
that "Jesus would not embrace Wal-Mart's values of greed and profits at 
any cost."

You may think that this particular campaign - which has, inevitably, 
been dubbed "Where would Jesus shop?" - is a bit over the top. But it's 
clear why those concerned about the state of American workers focus 
their criticism on Wal-Mart. The company isn't just America's largest 
private employer. It's also a symbol of the state of our economy, which 
delivers rising G.D.P. but stagnant or falling living standards for 
working Americans. For Wal-Mart is a huge and hugely profitable company 
that pays badly and offers minimal benefits.

Attacks on Wal-Mart have hurt its image, and perhaps even its business. 
The company has set up a campaign-style war room to devise responses. 
So how did Wal-Mart respond to this latest critique?

Wal-Mart can claim, with considerable justice, that its business 
practices make America as a whole richer. The fact is that Wal-Mart 
sells many products more cheaply than traditional stores, and that its 
low prices aren't solely or even mainly the result of the low wages it 
pays. Wal-Mart has been able to reduce prices largely because it has 
brought genuine technological and organizational innovation to the 
retail business.

It's harder for Wal-Mart to defend its pay and benefits policies. 
Still, the company could try to argue that despite its awesome size and 
market dominance it cannot defy the iron laws of supply and demand, 
which force it to pay low wages. (I disagree, but that's a subject for 
another column.)

But instead of resting its case on these honest or at least defensible 
answers to criticism, Wal-Mart has decided to insult our intelligence 
by claiming to be, of all things, an engine of job creation. Judging 
from its press release in response to the religious values campaign, 
the assertion that Wal-Mart "creates 100,000 jobs a year" is now the 
core of the company's public relations strategy.

It's true, of course, that the company is getting bigger every year. 
But adding 100,000 people to Wal-Mart's work force doesn't mean adding 
100,000 jobs to the economy. On the contrary, there's every reason to 
believe that as Wal-Mart expands, it destroys at least as many jobs as 
it creates, and drives down workers' wages in the process.

Think about what happens when Wal-Mart opens a store in a previously 
untouched city or county. The new store takes sales away from stores 
that are already in the area; these stores lay off workers or even go 
out of business. Because Wal-Mart's big-box stores employ fewer workers 
per dollar of sales than the smaller stores they replace, overall 
retail employment surely goes down, not up, when Wal-Mart comes to 
town. And if the jobs lost come from employers who pay more generously 
than Wal-Mart does, overall wages will fall when Wal-Mart moves in.

This isn't just speculation on my part. A recent study by David Neumark 
of the University of California at Irvine and two associates at the 
Public Policy Institute of California, "The Effects of Wal-Mart on 
Local Labor Markets," uses sophisticated statistical analysis to 
estimate the effects on jobs and wages as Wal-Mart spread out from its 
original center in Arkansas.

The authors find that retail employment did, indeed, fall when Wal-Mart 
arrived in a new county. It's not clear in their data whether overall 
employment in a county rose or fell when a Wal-Mart store opened. But 
it's clear that average wages fell: "residents of local labor markets," 
the study reports, "earn less following the opening of Wal-Mart 
stores."

So Wal-Mart has chosen to defend itself with a really poor argument. If 
that's the best the company can come up with, it's going to keep losing 
the public relations war with its critics. Maybe it should consider an 
alternative strategy, such as paying higher wages.
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